June GGR has weak start: Bernstein

Sunday 5th of June 2016

Macau’s gross gaming revenue last week was MOP 2.5 billion (US$312.5 million), implying ADR of MOP 510 million, said Bernstein in a note on Monday.

The ADR is higher than the MOP 490 million reported in the previous week, and is similar to the first week of June in 2015, which was MOP 521 million, said the brokerage.

According to Bernstein, assuming an ADR of MOP 530-570 million for the remainder of the month, June GGR would be MOP 15.8 - 16.8 billion, representing a decline of 3-9 percent.

Last week, Union Gaming analysts estimated June GGR should be in line with the daily rate of MOP 580 million. “This would result in total GGR of MOP 17.5 billion, and would represent the first year-on-year increase in GGR after 24 months of declines.

Recently, Daiwa Securities Group noted it is reducing its estimates for Macau’s 2016 gross gaming revenue.

“We are revising down the sector’s 2016 estimated GGR to -10 percent year-on-year, from -5 percent year-on-year, and expect weakness across all operating segments,” said analysts.

Monthly averages for the first five months of 2016 is MOP 18.4 billion.

However, analysts are still leaning towards a positive outlook, driven by an increase in revenues from the mass market.

“The good news is that the industry can return to profitability peak levels without having to reach peaks in terms of gross revenues. This is because the future of Macau is much more focused on the mass segment, which has significantly higher margins compared to the VIP market”, said Grant Govertsen, an analyst at Union Gaming.

In a note from Bernstein on Wednesday, the brokerage said that long term prospects from Macau are attractive, with a end of year GGR forecast revised to -3.5 year-on-year. Furthermore, the brokerage said it expects Macau market GGR to continue its "less bad" trend in June and July, and to resume year-on-year growth starting August.

"We forecast 2H GGR of 5 percent year-on-year growth (led by Mass) on the back of new project openings and slowing decline in VIP. Sustainable year-on-year growth coupled with profit growth should be a positive stock driver in 2H," said Bernstein.

Bricks & Mortar Earnings & Filings Decline ADR Outlook GGR